Closing the funding gap for women requires systems-wide change

Women-led startups secured a measly 4% of all venture capital invested in 2023 — but you probably already knew that. For all the conversation around funding for women, the dial is simply refusing to shift. Because, as Noga Edelstein explains, change requires an overhaul of the whole system.

It’s no secret Australian women founders are raising significantly less capital than their male peers. It’s likely we’re not the first to draw your attention to it.

The gender equity funding gap has been increasingly analysed, commented on and unpicked; we continue to monitor for changes and to implement all manner of initiatives to get more money into the hands of women.

But, for all our efforts, the gap is refusing to close. From some angles, it actually looks like it’s growing.

For Noga Edelstein, serial entrepreneur, tech ecosystem leader and thought leader (and former Tractor Head of Advisory), that’s because we’re taking a piecemeal approach to the solutions. What we really need, she says, is a system-wide shakeup.

The lay of the land

When comparing funding figures for women-led and male-led teams, there are a few metrics to consider. First, there is the number of deals made; or the actual number of startups securing funding. Then there’s the value of the deals, or the amount of dollars startups receive.

We also look at the stats for startups with mixed-gender founding teams, and those with a solo woman founder, or all-women founders.

According to the State of Australian Startup Funding report from Cut Through Venture and Folklore Ventures, in 2023, all-women founding teams accounted for just 12% of all deals completed.

Mixed-gender teams accounted for 14%. For these purposes, we’re calling these companies ‘women-led’, but this category could include anything from a startup with a woman CEO and leadership team, to a startup with one woman in a team of six co-founders, holding minimal equity.

Either way, that means a massive 74% of all deals backed all-male founding teams.

On average, deals backing women-led startups were also lower-value. Of all the dollars invested throughout the year, all-male teams secured 82%; mixed teams secured 4%; and all-women teams secured just 4%.

Partly, that’s because the majority of funding rounds for women-led startups are at pre-seed and seed stage. While all-women teams accounted for 22% of seed and pre-seed raises in 2023, they made up 14% of Series A and 5% of Series B deals.

The average deal size for all-women teams was $700,000, compared to $1 million for mixed-gender teams and $3 million for all-male-led teams.

It’s worth noting that the numbers are even worse for Women of Colour. While most reports don’t explicitly report on this, findings from a 2022 report suggested startups run by Women of Colour received a tiny 0.03% of the venture capital dollars invested.

We also don’t have easily accessible data for founders in the LGBTQI community, disabled founders, or other marginalised groups.

Who’s keeping track?

If you follow startup media, then none of the above will come as a surprise. That’s at least partly thanks to Cut Through Venture, which has been releasing its quarterly and annual Australian Venture Capital Funding Reports since Q1, 2021.

These reports don’t exclusively focus on women-led startups, but they are a major focus, and something the media and other commentators will often pick out. The reports offer a helpful kind of rolling check-in and – if we’re being slightly cynical – give startup journalists fresh fodder every quarter, helping to keep the reality of the situation front-of-mind.

Techboard also releases Year in Review startup funding reports. The 2023 report (including analysis from Q1 2024) reported similar findings, suggesting startups with all-women founding teams received 3.88% of venture capital investment, accounting for 12.58% of the deals.

Another oft-cited report is the Accelerating Women Founders report from Deloitte and SBE Australia, released in September 2022. That was one of the first high-profile pieces of data-based research drawing attention to the discrepancies in funding, and arguably laid the groundwork for much of the reporting and analysis we’ve seen since.

In 2022, Techboard also collaborated with SBE Australia on its Funding for Women Led Ventures report, a ‘companion’ to the Deloitte report, exploring some of the same data, and the overall environment for women founders.

Elsewhere, Startup Muster’s 2023 report asked respondents about their fundraising experiences.

While more women felt they had ‘good’ access to government grants, men were more likely to say they had ‘good’ access to angel funding, venture capital, family and friends funding, and crowdfunding. Incidentally, 38% of women founders said they had good access to none of the above, compared to 28% of men.

We’re also seeing a growing trend of self-reporting, with prominent venture funds including Blackbird, Airtree and Giant Leap signing up to Equity Clear to disclose the diversity data within their portfolios. Equity crowdfunding platform Birchal has also reported on companies backed and – yes – Tractor Ventures, too.

And, of course, key media players including Forbes Australia, the Australian Financial Review and the Sydney Morning Herald are increasingly reporting on gender disparity in the startup ecosystem. So too are startup-focused publications such as SmartCompany and Startup Daily, and women-focused publications such as Women’s Agenda.

While it’s not focused on the experiences of founders, in particular, Grapevine also shares anonymised stories of harassment and abuse in the tech ecosystem, shining a light on some of the realities facing women in the sector, including through its 2024 Harvest report.

Who’s moving the needle?

There are VCs, investment groups and initiatives focused on changing the tide here; on supporting women to enter the ecosystem and thrive within it.

Founded by Carol Schwartz, Female-Led Ventures invests in both women-led fund managers and founders, in a bid to tap into unrealised potential in Australia.

Artesian also has a $100 million Female Leaders VC Fund, which invests in Series A and B rounds of high-growth, women-led startups.

F5 Collective is committed to funding 1,000 women across the APAC region by 2030, and ALIAVIA Ventures — founded by two Aussie women living in California — also invests in early-stage women founders across the US and Australia.

Scale Investors is an angel network focused on backing women, while Coralus (formerly SheEO) offers community-sourced interest-free loans.

Apropela (formerly Heads over Heels) is intended to open business networks to women entrepreneurs. SBE Australia offers networks, programs and advisory services for women founders at all stages of their journeys, while programs like Mums and Co and Tech Ready Women offer community, connection and mentorship.

Other funds, such as Rachael Neumann and Kylie Frazer’s Flying Fox Ventures, don’t necessarily have a women-only focus, but do boast more than 50% women investors, and a commitment to backing women.

Flying Fox also runs a pre-accelerator program for women-led startups, and is launching a women-focused sidecar fund.

A note on government initiatives

We won’t go into the imperfections and ultimate demise of the federal government’s Boosting Female Founders fund here. However, we will note that this was one of a very small selection of government initiatives focused specifically on funding women-led businesses.

LaunchVic, the Victorian government’s startup agency offers its Alice Anderson Fund, a sidecar vehicle offering combined equity and debt capital to women-led startups.

And in Queensland, the state government’s Backing Female Founders program includes a co-investment fund that offers grants to women-led businesses actively seeking investment elsewhere.

In 2022, Investment NSW also announced the $10 million Carla Zampatti venture capital fund, however, this was scrapped just nine months later before it launched.

Still, overall, it’s not necessarily that we’re short of initiatives designed to support women. It’s not that the community itself is apathetic.

Rather, according to Noga, the challenge is systemic.

“For too long, we’ve been focused on capacity-building initiatives and diverting small streams of ‘impact’ funding towards women. It’s time to stop fixing the women and start fixing the problems that stand in their way,” she says.

What are we missing?

Despite the analysis, media attention, mentoring and funding initiatives, the stats are simply refusing to shift. So it’s time to expand our focus.

“The ecosystem has done a great job of bringing awareness to the metrics. They’re easy talking points,” Noga says.
“And yes, the metrics are important. But what we need to be talking about are the compounding factors driving this problem, and why we need to take a lifecycle view if we want to make any meaningful impact.
“We know there are many reasons why it’s harder for women to raise funding. They suffer both direct and unconscious bias; they have less access to networks; they rarely fit the VC founder archetype so are perceived as higher risk; not to mention the issues around discrimination and harassment.
“But these don’t happen at one single point in time. If you overcome one challenge, all of the others still exist.”

If we remove one barrier and one pain point, without joining the dots, then we will never address the complexity of the problems at hand, Noga notes.

If we direct more seed funding to women, for example, but fail to plug the gap at Series A and beyond, then women-led ventures just fall off of a different cliff, later in the journey.

We know women raise less, on average than their male counterparts in the early stages. So when they get to Series A, investors are comparing their progress and growth metrics to people who have been working with twice or three times the resources. 

“This continues to play out at each pivotal moment, so women are perpetually building their companies with one arm tied behind their back.”

For Noga, real change will only come with a full systems overhaul. No one investor or accelerator program can close the gap single-handedly — this is a broad challenge that requires decisive leadership and a forward-thinking and collaborative approach, both within the ecosystem and outside of it.

“It’s not just what’s happening within VCs, it’s everything that goes into a woman’s experience when she tries to build and scale a company,” Noga says.
“It’s social policy and childcare; it’s the superannuation gap and fear of long-term financial insecurity; it’s the inadequacy of workplace harassment laws to deal with the founder-investor relationship; it’s the fragmentation of innovation funding across state borders; it’s a lack of alternative sources of capital beyond venture.
“It's far too simplistic to just point fingers at the VCs. Government policy absolutely needs to play a pivotal role here too. Unless we address the system as a whole, we’re never going to shift the metrics. That’s what is becoming abundantly clear.”

Noga is advocating for a national strategy to address the gender funding gap. Over the past ten years, while the total capital pool for startups has grown significantly, the percentage allocated to women-led startups has remained stagnant.

Over that time, Noga says, what we’ve seen is a series of isolated interventions operating in silos across the ecosystem, each trying to tackle one part of the problem. 

“If we are to create long-term, systemic change, we need an evidence-based approach, and a roadmap for change. At the moment there’s no one in charge of tackling this problem. There’s a critical gap in the ecosystem.”